Amazon puts new online grocery customers on hold, reconfigures Whole Foods

Discussion
Photo: Nick Lake/Amazon
Apr 14, 2020
Matthew Stern

The surge of online grocery adoption due to the coronavirus pandemic has led to slowdowns and stock-outs from the once untouchable Amazon.com. Now the e-tail juggernaut is taking unprecedented steps to play catch up with the massive demand.

Amazon began placing new grocery delivery customers on a wait-list yesterday, according to CNBC. The move comes as existing Amazon grocery shoppers have been increasingly unable to find delivery slots and therefore unable to place orders. Amazon is also reconfiguring Whole Foods’ role in the delivery process. After boosting the number of locations with available grocery pickup from 80 to 150 due to increased demand, Amazon has decided to shorten hours that Whole Foods is open to the public in order to focus on online order fulfillment.

At least one Whole Foods location has been closed entirely for foot traffic and is being used solely for online order fulfillment. The chain sent out an email on April 13 informing customers who frequent the Bryant Park Whole Foods location in Manhattan that the store would be temporarily closed to focus on online orders. The message directs customers interested in in-store shopping to visit the Union Square, Columbus Circle or Midtown East stores. It also suggests that customers can place orders online through Amazon, although it notes that delivery slots may be unavailable due to demand.

The coronavirus-inspired rise in e-grocery demand has been driven in no small part by new customers. A full 28 percent of online grocery shoppers made their first purchase in March, according to a study by Acosta.

The inability to meet skyrocketing customer demand is only one of the problems Amazon has been facing as a result of the coronavirus pandemic. It has also received criticism from some quarters for failing to take appropriate steps to ensure the safety of its warehouse staff.

Amazon is not the only target of such charges. Anxiety and alarm have grown throughout the U.S. grocery world as news emerges of frontline store staff becoming infected with — and even dying from — COVID-19 at stores run by Giant, Trader Joe’s and Walmart.

DISCUSSION QUESTIONS: Will wait-listing new customers and converting Whole Foods locations to online fulfillment centers allow Amazon to get on top of its e-grocery demands? What do you think the online grocery shopping landscape will look like when the dust settles?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"[This represents] a classic advance and secure strategy. It recognizes that advances into these uncharted territories require a planned effort to secure the ground taken."
"Even before “the dust settles” brands are smart to focus on existing customers even at the expense of prospective ones, if they have such constraints."
"I know we are in a time of crisis and everyone is doing the best they can, but Amazon continues to stub their toe with their customers."

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37 Comments on "Amazon puts new online grocery customers on hold, reconfigures Whole Foods"


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Michael La Kier
BrainTrust

The pandemic has shown significant cracks in the system. Even the world’s largest and most successful online retailer can’t keep up with the shift in demand driven by the COVID-19 pandemic. They – and all retailers – must prioritize elements of their business to be successful. The move by Amazon to “wait list” new customers shows that loyalty does have a value. However, I’m not sure this will allow them to catch up.

Dave Bruno
BrainTrust

It appears that Amazon has no choice but to make these changes. Amazon’s inability to cope with the surges in demand is one of the only major execution challenges I can recall Amazon failing to overcome. They have hopefully done far more planning about that reconsideration than I have, but I do think reducing store hours to support online order fulfillment is a great start. However, I wonder if closing some stores, entirely, including eliminating curbside pickup options from some stores is a wise move. It seems that those curbside pickup customers will simply convert to delivery customers or, if lead times are too long, they will switch grocers, no?

Oliver Guy
BrainTrust

Fascinating. One thing is clear, consumers who try online grocery are unlikely to want to go back to in-store – this is going to accelerate adoption levels. Therefore any investment in capacity is going to be for the long term – not just for now.

The U.S. market needs capacity and quickly – capacity that is elastic and can be added to rapidly. A mix of automation, humans and ecosystems will be needed to enable this – as has been seen in the U.K. with Ocado, a fully automated solution cannot scale up rapidly enough. I wrote about some of these concepts and the U.S. market 12 months ago based on projections of growth – I now feel these predictions are far too low.

Art Suriano
Guest
Amazon is dealing with new challenges every day. There are no right or wrong answers because we have never dealt with anything like this. We can’t look back and say “well, the last time we did this and we did that.” Each day grocers face new challenges — from customers being required to wear masks, to limiting the quantities of items purchased, to reduced store hours and more. As for online, it’s even harder because of the demand with most time slots booked, making it nearly impossible for customers to place orders and get their goods delivered or picked up. So I commend Amazon for attempting to stay ahead of how to handle issues. It makes sense that they are respecting their loyal customers before tending to the newbies. In the end no one is going to be happy but, hopefully, when this ends, those who had been loyal to Amazon and Whole Foods will continue to remain so because they felt the company did everything possible to take care of their needs.
Adrian Weidmann
BrainTrust

The COVID-19 pandemic artificially expedited what would have taken a much longer time to become more commonplace – the acceptance and consistent usage of online grocery shopping. We are creatures of habit and this pandemic forced us to change our definition of normal. Now that so many have been forced to use online grocery shopping and delivery services – because of the convenience, for many, this will become the new normal. Grocery stores will begin to remodel their floor plans and planograms. Center store will shrink and make way for larger backroom stocks, inventory and fulfillment while produce, deli, meats and prepared foods will become prominently featured experiences.

Herb Sorensen
BrainTrust

In other words, maybe retailers will actually pay more attention to their shoppers than to their suppliers, and their own management of 40,000 items in 40,000 square feet of store. They’ve done a GREAT job in managing SELF-service, aka the sell-to-yourself shoppers business. The shoppers themselves have done a GREAT job in selecting the FEW items they need regularly. Half of ALL shopping baskets contain only five or fewer items, ONE being the most dominant purchase. But why care about all that, when the retailers’ real obsession is with the “stock-up shopper” — a tiny minority of their regular customers?

David Naumann
BrainTrust

Waitlisting customers or offering ordering cycles that are up to two weeks out are not isolated to only Amazon customers. Several grocery chains are dealing with the same demand issues as Amazon. The one big customer change as a result of COVID-19 is the increase in customers that have tried online grocery ordering for the first time. Many customers may find that they like the convenience of online grocery ordering and it will become a habit which will provide a permanent boost to online grocery.

Jeff Weidauer
BrainTrust

As much as we want to, it’s difficult to fault Amazon for its failures in meeting skyrocketing demand for online services. All other grocers, along with Instacart, are struggling as well. But Amazon until now has had a reputation of making and keeping bold promises. Amazon needs to be sure it’s ticking all the boxes as it works to provide solutions. That’s not just fulfilling orders, but also worker safety and fair compensation for those on the front lines.

Kathleen Fischer
BrainTrust

The pandemic has greatly accelerated online grocery shopping acceptance. While there will likely be a fallback in online grocery orders when we reach the other side of the pandemic, it is clear that more consumers will adopt online grocery shopping as a norm.

Richard J. George, Ph.D.
BrainTrust

Amazon’s actions in this regard represent a classic advance and secure strategy. It recognizes that advances into these uncharted territories require a planned effort to secure the ground taken. In addition, placing new customers on a wait list is an example of strategic retreat. Both of these strategies are intended to allow Amazon to be better prepared for the next battle in this war.

Online will continue to flourish post COVID-19 and Amazon will have expanded its leadership position.

Ben Ball
BrainTrust

Spot on description of the right strategic approach to this situation Professor. And your comment on “strategic retreat” is excellent. Sun Tzu may not be in your bloodline, but he clearly influences your thought processes. Compliments.

Neil Saunders
BrainTrust

Converting Bryant Park to online-only is reasonable: it is in an area which is mostly commercial and not residential, and most offices in NYC are closed. Doing the same in most other locations would be lunacy: it denies those without online access the chance to shop, it reduces capacity as there’s no way a store can shift as much volume under an online only model as it can when open to the public, and it damages margins. Plus it would likely damage Whole Foods’ brand: I can’t see customers who don’t have access to other nearby Whole Foods locations being too pleased if their store shut to become online only.

Gene Detroyer
BrainTrust

In the short term this makes sense. Whole Foods has physical locations that they can turn into online-only. But more important than that is it establishes the value of having an online-only physical location. This move itself will prove the efficiency of separating the two types of outlets (and get those online fulfillers out of my retail Whole Foods).

Herb Sorensen
BrainTrust

This is simply an expansion of the “dark store” concept discussed on page 43 of “Inside the Mind of the Shopper!

Lee Peterson
BrainTrust

I believe that what Amazon is doing with some Whole Foods locations (turning them into fulfillment centers) is the future of retail, not just grocery. If you have six stores in a metro area, why not make half of them “dark” or “cloud” in order to meet online demand/provide next-day service and subsequently make the other half worth visiting by improving the overall experience? The store of the future is not a store at all, it’s half fulfillment center, half excellent experience — just ask Target.

Michael Terpkosh
BrainTrust

I know we are in a time of crisis and everyone is doing the best they can, but Amazon continues to stub their toe with their customers. When you are the biggest in your business and you make claims/promises to consumers, many who paid for Amazon because of its fast, reliable service, you must deliver the goods (literally). Others are having problems too, for example, Instacart. When the dust settles I predict a downturn in online sales because of the poor service and poor quality experience. Plus consumers will want come out of their homes, want to be in public and once again enjoy the shopping experience.

FrankKochenash
Guest

Perhaps. But Amazon has adjusted delivery promises based on capacity. It has caught grief for this in some quarters, but it has also met or beaten these promises (based on a sample of checks across my network). Their customers appreciate this. Prioritizing Prime members and wait listing new customers, due to capacity, also strikes me as a practical tactic that customers will understand, especially with the fact that almost all other retailers are struggling as well.

Also, COVID-19 is, I think, an 8-16 month event. Consumers will be concerned about safety and social distancing for the duration of this time. It will ebb and flow based on local circumstance, but the likely desire to enjoy shopping will be balanced by continued avoidance of undue infection risk.

Gene Detroyer
BrainTrust

Anecdotally, we have had a delivery order in with Whole Foods for over three weeks. I first would go to the website a few times a day to see if there were any delivery slots. There were none. Then I just went once a day. No luck. Then I was just going randomly. Then yesterday, all of the sudden a delivery slot opened up for TODAY!

Could the reason be that they closed the Bryant Park store to in-store shopping and made it exclusively for online orders? Time will tell, when I put in a new order. But it strikes me that this move was late in coming and obviously more efficient than combining in-store and online in the same location.

Gene Detroyer
BrainTrust

OMG. It just arrived.

Dick Seesel
BrainTrust

Question for panelists: Any comment on whether Amazon Fresh has been more functional than Whole Foods lately?

Peter Charness
BrainTrust

Not in Portland. I can’t get a delivery window for either of them.

Rick Moss
Staff

Same story here in NYC, Peter and Dick. The Amazon Fresh home page displays a “Delivery temporarily sold out” notice.

Michael La Kier
BrainTrust

Atlanta is the same story … refresh, refresh, refresh.

Lisa Goller
BrainTrust
Right now everyone faces lessons in patience and humility. The number one complaint I’ve heard is how consumers feel disappointed by Amazon’s out-of-stocks — and how they’re frustrated to be so loyal to and dependent on the e-commerce giant. That said, waitlists will help Amazon engage patient new consumers while it stalls to re-engineer e-grocery processes to improve speed, agility and reliability. Once the dust settles, we’ll see these trends: <UL More online shoppers: Almost every adult will be online. Now homebound seniors suddenly have an urgent need to create online shopping accounts unless they have a loved one to shop for them. More data insights: Amazon will gain access to more demographic and product data, including items that we tend to buy in brick-and-mortar stores. (Last week I registered with two retailers I never would have used for e-commerce before coronavirus.) More voice tech adoption: Voice devices may grow in appeal for efficient shopping, browsing and buying. Lately, more consumers have embraced these devices to learn the latest updates on COVID-19. As usage frequency… Read more »
Ken Lonyai
BrainTrust

It’s truly ridiculous that John Mackey has been allowed to project his weak management for so long and that the world’s richest boy-wonder knowingly followed him this deep into a hole.

When Whole Foods was acquired, pundits and industry consultants boasted about how amazing and untouchable Whole Foods would be with the backing of Amazon, specifically BECAUSE OF AMAZON’S SUPPLY CHAIN EXPERTISE! In the nearly three years leading up to the coronavirus outbreak, there was no significant positive change to the company for consumers and in fact, Order-to-shelf has been a problem, prices (after PR spin) are still SKU for SKU higher than probably every competitor, and as we see, no crisis planning any better than competitors–probably worse than some.

Amazon has positioned itself in the minds of consumers as a mythical go-to, clearly beyond the reality of what they can deliver. With all the hype and spin Amazon has put out there, more focus was clearly needed to be prepared to respond to crisis situations than creating a facade of the everything store.

Brandon Rael
BrainTrust

The online grocery shopping model has been disrupted significantly over the past few weeks. Significant wait times, lack of shopper slots via instacart, and local grocery stores being overwhelmed with online orders coming in at an unprecedented rate has become the norm. What was once viewed as a luxury or convenience play, online grocery shopping with flexible fulfillment options, has become the norm.

With that said, while companies such as Amazon/Whole Foods reconfigure their delivery operating model, consumers will have to seek other alternatives that enable them to shop for food and essentials. Customers who shop online now and for the next few months may ultimately never want to shop in a grocery store again. However, we should expect plenty of customers will still want to shop in the grocery store for the experiential side of the business.

We should expect physical grocery shopping to be remodeled to a service first strategy, built around lifestyle, health, wellness, restaurants, cafes and other sensory experiences. Most of the staple groceries could be bought online via auto-replenishment.

Ananda Chakravarty
BrainTrust

Waitlisting new customers means they just lost those new customers. Converting Whole Foods to an online center may take time and might not have enough meaningful effect — it’s only 1 percent to 2 percent of the grocery market. The base function of delivering on time and quickly is the key. Customers are jumping from site to site to find time slots for their groceries and using any service they can to fulfill. Amazon’s inability to deliver will be a thorn in its side when the dust settles. The high demand and meeting it is critical as part of the Amazon brand and reputation. They have to meet it or customers will go elsewhere when demand subsides.

Zel Bianco
BrainTrust
The Bryant Park store makes the most sense as it is located right on 6th Avenue alongside mostly offices. That does not mean it should close to fill online orders. There are dense residential areas in less than two avenues over to the east, and three blocks to the west it is mostly residential or mixed. The Bryant Park store could and should continue to be used for regular shopping. So why hasn’t Amazon built out or converted one or more of the available large retail storefronts that are sitting idle? Why not keep the stores open for both in-person shopping as well as pick-up? Heck, if they wanted to – they could partner with restaurant groups to prepare meals. This is the time to be creative. Yes the logistics may sometimes be challenging but if we can build a hospital at the Javits Center, I think Amazon can figure out how to fill online orders from a space other than their stores. If those that would normally shop at Bryant Park end up at… Read more »
Shep Hyken
BrainTrust

The system is being tested. In some cases it’s working and in others it’s showing cracks. Wait-listing new customers is fair to existing customers. There are some unhappy customers when Amazon (and any other retailer) is out of stock. These are unique times and everyone is adjusting and figuring out how to best serve their customers. I’m confident these large retailers are doing their best. It’s hard when a consumer feels fear. That fear can turn to frustration and anger. Amazon and other retail giants are doing their best to get people as close to business-as-usual as possible.

Phil Rubin
BrainTrust
5 months 4 days ago

From a pure customer loyalty perspective, what Amazon is doing here makes total sense. In fact I am surprised that they – or any other grocer – have not had “members only” shopping hours similar to what they have done for customers age 60/70+.

Prioritizing existing customers is fundamental to a brand showing loyalty to customers. One on hand, it’s no different than airlines and hotels offering upgrades tied to customer value. However it is somewhat more of a challenge for Amazon Prime members, who pay more than $100 per year, given that there are now well over 100 million of them.

Even before “the dust settles” brands are smart to focus on existing customers even at the expense of prospective ones, if they have such constraints.

Peter Charness
BrainTrust
Grocery is hard … period. All the effort into store locations, compelling interiors, great looking fresh areas, prepared foods, none of that has any value to an online shopper who wants delivery. They don’t care if the store is nearby, or 100 miles away, as long as their order gets filled and at a fair price. Getting an accurate available to promise, particularly for fresh food in a grocery store is also very difficult, so accepting orders on flaky in-stock positions makes the online experience difficult. I don’t believe that a network of dark stores is the best answer; I still hold out hope that a multi-purpose “store” can satisfy both online and physical shoppers. That said there are a number of basic infrastructure requirements that grocers will need to put in place to satisfy the new significant online business. Some will take a while to figure out — we’ve been at this new reality for a very short period of time. Some things though can be fixed pretty quickly. Like “No Instacart, you can’t… Read more »
Kenneth Leung
BrainTrust

No retailer could have planned for or seamlessly adjust for a COVID-19 level of change in consumer behavior. Very few companies can afford pandemic fall-back plans. Amazon is doing what it needs to do to satisfy demand because consumers can’t/don’t want to leave their house, and it is doing it in a way that it can switch back after this is over. A certain percentage of consumers will find the convenience addicting and continue to shop grocery online. However I suspect many consumers having been forced to stay at home for 2 months will actually want to go out to physically shop just to get out of house….

Tony Orlando
BrainTrust

According to what I’m reading, everyone wants delivery or pickup, and that will be the future. I disagree, as many consumers want to get out, and engage with people, whether it is a grocery store, department store, or a farmers market. If everyone wanted delivery for everything they buy, the congestion on the roads in cities, and suburbs would be overwhelming, which will lead to late deliveries, soft ice cream, and upset consumers. We will see what happens, and I’m betting on the consumer who craves great service.

Craig Sundstrom
Guest

Isn’t the correct way to phrase it “staff at stores became infected,” not “staff became infected at stores” (I.e. we really don’t know how/where they were infected.)?

There’s more demand than supply right now — both for specific products and more generally for “shopping” so while this may help online, obviously it will hurt in-store … which of course is where the lion’s share of buying takes place.

My guess — and maybe with a dollop of “wishful thinking” involved — is that in the long run we’ll return to the pre-existing pattern: online will be growing but still only a small amount of the total. For every person who has been impressed by online during this ordeal, there are others who will come to hate it.

James Tenser
BrainTrust

Amazon/Whole Foods is certainly not the only online grocery retailer that has discovered how brittle their systems are in the face of a major discontinuity in demand like the present pandemic.

Who would have guessed that a giant like Amazon would be unable to keep up? We hear anecdotes about service breakdowns at other retailers and delivery services too. When I attempted to make some online orders last weekend at several retail sites, including Whole Foods, the process was so frustrating that I gave up, masked-up and went to a store.

Postponing acceptance of new delivery customers is a painful step. At least Amazon has shown the integrity to tell the truth.

The irony of the present situation is how much it has driven new trial ahead of projections. Yet the number of unsatisfactory shopper experiences has also skyrocketed. Not the best way to win new customers over.

Brian Cluster
BrainTrust

Due to this unprecedented situation, Amazon was caught behind their retail rivals. While Target, Walmart, and Kroger developed their curbside pick up model over the past few years, Amazon was not focused on this delivery model for the Whole Foods stores and had not rolled it out to many stores nationwide.

From an eCommerce delivery option, home delivery may have been a preference of many customers over pick-up but with the expansion of curbside pickup, there may be a shift where curbside gains a larger share of eCommerce grocery. While Amazon continues to have a larger share and will continue to grow in CPG ecommerce, the remaining larger players with thousands of curbside pick-up locations may capture a bigger share of the increasingly larger pie.

Mark Heckman
BrainTrust
Whole Foods, along with Trader Joe’s, Fresh Market and a host of other specialty food stores, are not the ideal format to support the extraordinary increase in demand of paper and cleaning products, and a host of center store items that shoppers are buying to keep the pantries full. With that said, Amazon may have no choice in closing down a number of WF stores and convert them into fulfillment warehouses as a short term buffer to meet demand. Perhaps a silver lining to this pandemic for Amazon lies in the repurposing of many WF stores as more conventional stores, with broader inventory in center store staples and less emphasis on gourmet items and tonight’s dinner. Going forward, all bricks stores will need to think through how they can make shoppers feel safe while in the stores. To that end, bricks stores that are now designed to lure the shopper into spending extra time perusing through aisles and encountering dozens of other shoppers along the way, may finally start thinking about re-designing their stores and… Read more »
wpDiscuz
Braintrust
"[This represents] a classic advance and secure strategy. It recognizes that advances into these uncharted territories require a planned effort to secure the ground taken."
"Even before “the dust settles” brands are smart to focus on existing customers even at the expense of prospective ones, if they have such constraints."
"I know we are in a time of crisis and everyone is doing the best they can, but Amazon continues to stub their toe with their customers."

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